Most people buy and sell their Bitcoin through exchanges but this is not always possible or ideal. The cost can be expensive, time consuming and the exchanges are becoming more and more demanding when it comes to ID verification in order to comply to government regulations. Many people feel this is an encroachment on their private lives and so look to peer to peer networks to buy and sell their Bitcoin.
Sites such as LocalBitcoins.com (international)or Wall of Coins (USA only) provide a peer to peer service where buyer and seller agree on a price and the sellers Bitcoins are held in escrow until payment has been established.
We will focus on localbitcoins as that is truly international. Firstly you need to open an account with them which is fairly easy. Just a user name, email address and password. Ni verifyable ID is required. Users are called traders who create an 'advertisement' with the price and preferred payment method. You can browse the website for traders near you and which offer the payment method you prefer.
According to localBitcoins.com, 'All online trades are protected by escrow. When a trade is started the amount of Bitcoins for the trade is automatically reserved from the seller's LocalBitcoins Wallet. This means that if the seller runs away with your money and does not release your Bitcoins LocalBitcoins.com support can release the Bitcoins to you from escrow.'
Of course if you are selling Bitcoins you do not release the coins from escrow until payment has been received from the buyer. It is well to remember that although bank, PayPal and credit card payments can be reversed Bitcoin payments cannot.
Once a trade is started the coins taken from the sellers LocalBitcoin wallet and held by LocalBitcoin for the length of the trade until completed. are put into escrow so if you pay for Bitcoins and the money is established as being received but the seller does not release the Bitcoins they stay in escrow and a dispute is opened.. If the seller is trying to scam you, it's easy for you to open a dispute on the trade and our support staff will contact you to ask for proof that you have paid and then once they receive that they will transfer the Bitcoin to your LocalBitcoin wallet. Whereupon you can then transfer it to your cold wallet.
Steps to follow are
1. Register an account with LocalBitcoins.com All it takes is a user name, email address and password.
2. If you are buying go to the next page and fill out the details of the amount of currency you wish to buy, your location and chose a payment method. If you’re unsure you can select 'All payment offers.' Then all the traders in your region will be listed.
3. Select a trader from the list provided. Do some due diligence and select a trader with a good reputation score and a high volume of trades. There is a response time indicator also you can check. If a trader usually response within five minutes there is a green dot by their name. If within 30minues a yellow dot. Longer than 30 minutes is a grey dot. If you click the buy button you can find out more about the advertisement.
4. When you press the buy button the terms of of trade with that trader show up along with other information such as payment methods accepted. If you are not happy with that trader you can simply go back and select another. Once you have selected the trader you wish to use type in the blue box how much you want to buy, enter a message for the seller and click the Send trade request button to the start the trade. Ensure you're ready to pay when clicking the button as if you don't pay before the payment window is over, the trade will be automatically cancelled.
5. Once you have paid click the 'I have paid' button. The trader will verify your payment has been received and will release your bitcoin from escrow and it will immediately become available in your LocalBitcoin.com wallet. From there you can transfer it to your cold wallet.
Basically a very simple process and conveniently very private. One just has to ensure one is dealing with an honest trader.
This article is for information purposes only and is not to be construed as financial information for any purposes such as investment or speculation and it is the responsibility of the reader to perform proper due diligence before acting upon any of the information provided. We recommend that you consult with a licensed, qualified investment advisor before making any investment decisions.